Presentation for the Supply Chain Innovations conference of Value Chain in 2016. Talking about how to use the supply chain triangle to define which sets of metrics to benchmark, and how strategy influences the target setting.

1. Strategic Target Setting
In the Supply Chain Triangle
Prof.dr. Bram Desmet
bram.desmet@mobius.eu
+32.497.58.28.60
be.linkedin.com/pub/bram-desmet/1/788/823/
@bram_desmet

2. My name is Bram …
• Business
• 1998 - 2003: IT manager, Arcelor-Mittal, Gent (Sidmar)
• 2003 - …: Consultant Strategy – SupplyChain – Operations, MÖBIUS
• 2009 - …: Managing Director, Solventure, S&OP software and software based services
• Sector experience: aftermarket, chemical/pharma, consumer goods, discrete/high-tech,
metals, retail, recycling, SME's (+50 companies)
• Academic
• 1998, Master in Mathematics, Gent University
• 2002-2004, Executive MBA, Vlerick Business School
• 2006-2009, PhD in Operations Research, Gent, Multi-Echelon Inventory Optimization
• 2010-…, Adjunct Professor at the Vlerick Business School, Supply Chain and Operations
• Contact info
• bram.desmet@mobius.eu, +32.497.58.28.60
• be.linkedin.com/pub/bram-desmet/1/788/823/
• @bram_desmet

3. How much inventory do
we really need??

9. Company 2: strong in
inventory turns but
out of balance
Company 3: better
balanced but did not
recover to pre-crisis levels
Company 1: better
balanced & good
rebound after crisis

10. STRENGTH
BALANCE
RESILIENCE

12. e.g. reduce cost by
sourcing in far East

13. e.g. increase market
share by extending
product portfolio

14. e.g. reduce inventory
by lowering safety
stocks

15. Focus/incentives in a
typical production
company …

16. Resulting pressure in
the triangle

17. … what happens if a
business is under
pressure …
17

18. Aligning the triangle
is about maximizing
ROCE
Top-line
EBIT
ROCE

23. Market leaders are
‘extremely disciplined
and focused’ on 1 of 3
strategic options
Treacy & Wiersema,
1995
Operational Excellence Product Leadership Customer Intimacy
• ‘Best price’ and/or
• ‘Best access’ (‘fast, easy,
painless’)
• ‘Best product’ • ‘Best service’ and/or
• ‘Best connectivity’
(‘relationship
orientation’)
• Efficiency through
process thinking
• Zero-defect service
• Best product through
continuous product
innovation
• Clear innovation strategy:
where to place the bets?
• Understanding the
broader problem
• Having expertise about
the customer’s business
• Customers carefully
selected
• The operations
department drives the
company
• Attention is paid to
process speed and quality
• R&D is key: idea
management
• Marketing is also key:
educate people with a
missionary zeal
• Get engineers, designers,
and marketers
systematically together
• Demonstrate expertise
and experience
• Strengthen the
relationship
• Build loyalty: focus on
customer retention

24. Product Leadership
highest cost in R&D, marketing, supply chain
Customer intimacy
the extra mile comes at an extra cost
Operational Excellence
cost leader in every fibre of the organization
service
inventory cost
Higher
turns
Lower
cost
Higher
service

25. Product Leadership
highest complexity, highest risk
Customer intimacy
controlled complexity
Operational Excellence
simplicity drives efficiency
service
inventory cost
Higher
turns
Lower
cost
Higher
service

26. Product Leadership
emotion beyond functional service
Customer intimacy
an extra mile for a premium
Operational Excellence
excel in the basics
service
inventory cost
Higher
turns
Lower
cost
Higher
service

27. Product Leadership
highest risk with highest potential payoff
Customer intimacy
an extra mile at an extra cost and premium
Operational Excellence
excel in cost and the service basics
service
inventory cost
Higher
turns
Lower
cost
Higher
service

28. Product Leadership
highest risk with highest potential payoff
Customer intimacy
an extra mile at an extra cost and premium
Operational Excellence
excel in cost and the service basics
service
inventory cost
Higher
turns
Lower
cost
Higher
service
EBIT
Remember ROCE principle: lower turns require a higher EBIT!
EBIT of product leader should be the highest!!

29. Product
Leadership
Customer
Intimacy
Operational
Excellence

30. Key Takeways
• Never benchmark in only 1 dimension
• Make sure to balance Service, Cost and Cash: the
Supply Chain Triangle
• Different strategies lead to different targets
• Remember ROCE principle: lower turns should be
compensated by a higher EBIT!

31. Want to know more?
• Cfr. http://www.slideshare.net/bramDesmet/
• Cfr. Solventure Youtube channel for video blogs
https://www.youtube.com/channel/UCzyuODMMCk2vXkcQLawJVkg

32. Thank You!!
Prof.dr. Bram Desmet
bram.desmet@mobius.eu
+32.497.58.28.60
be.linkedin.com/pub/bram-desmet/1/788/823/
@bram_desmet